France’s credit rating has some breathing space: S&P Global

By Marc Jones

LONDON (Reuters) – S&P Global (NYSE:) said on Wednesday there would have to be a significant deterioration in the French government’s finances before any kind of credit rating downgrade becomes a possibility.

S&P rates France AA with a ‘stable’ outlook but the country has been in focus after weeks of often violent “yellow vest” protests forced President Emmanuel Macron to announce 10 billion euros ($11.37 billion) of minimum wage rises and tax cuts.

Worries that politically-sensitive pension and healthcare cuts could also end up being watered down have driven up bond market borrowing costs, but S&P said that, from a rating perspective at least, there was no immediate threat.

“France’s rating is in the middle of the (AA stable) rating band so you probably need a fair amount of deterioration for it to start moving into negative territory,” S&P’s lead global sovereign analyst Roberto Sifon-Arevalo told Reuters.

France’s near 100 percent debt-to-GDP is ratio is higher than many countries but S&P expects Macron’s government to “cushion” the additional spending by making cuts or raising revenues elsewhere.

    On the risk to healthcare and pension reforms Sifon-Arevalo added: “we would analyse the degree of the watering down and what if anything is done to compensate, otherwise you might find yourself overreacting and that is something we want to avoid.”

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